Improve OEE vs Buy a New Machine Calculator
When capacity runs short, the request is often for another machine. Before approving it, compare what the same units would cost from improving the OEE of the equipment you already own. This calculator puts both routes on a cost per extra unit basis so the capex request is tested against hidden capacity.
Your numbers
Sum of planned production hours for all existing machines doing this work.
One-time cost of the improvement program.
Used to spread both costs evenly.
Purchase, installation, tooling and commissioning.
Maintenance, floor space, utilities and added labor.
Your results
Simplified straight-line comparison. It ignores tax, financing, residual value and the risk that the improvement does not reach target.
Cost per extra unit vs target OEE
Sweeps Target fleet OEE from 61 to 85, holding your other inputs fixed.
Build the capacity case from ERP data
Optional: we can discuss how to source planned hours and actual run time for this comparison.
Optional. The tool and every export work without this. No spam.
How to use it
Enter the planned hours and the ideal rate of the existing fleet, current OEE, and the OEE you could reach with a defined program. Add the improvement cost and the evaluation horizon. For the alternative, enter the installed cost of a new machine, its running cost, its planned hours and its expected OEE (a new machine rarely hits its best OEE in year one, so be cautious). The result is the annualized cost per extra good unit for each route and the annual cost difference.
- Base current OEE on at least a quarter of data
- Keep the same ideal rate definition for both routes
- Use a realistic OEE for the new machine's first years
The method
Extra units from improvement equal fleet hours times ideal rate times the OEE gain divided by 100. Extra units from the new machine equal its hours times ideal rate times its OEE. Annualized cost is a straight-line spread of the one-time cost over the horizon plus any running cost. Cost per extra unit is annualized cost divided by extra units. This is a deliberately simple screen. It tells you which route deserves a full business case with discounted cash flow, not which to buy.
Reading the result
With the defaults, raising OEE from 60 to 72 percent yields 192,000 extra units a year at an annualized cost of 16,000 dollars, or about 8 cents a unit. A new 650,000 dollar machine costing 40,000 a year to run yields 300,000 units for 170,000 dollars a year, about 57 cents. Improvement looks much cheaper, but it carries delivery risk, and it uses existing hours that might be needed already. Where demand exceeds even the improved capacity, you may need both routes, with the improvement done first.
Common mistakes
Comparing a hoped-for OEE gain against a guaranteed machine capacity is the main bias, so apply a haircut to the OEE target. Another is using the new machine's nameplate rate with unrealistic OEE, or forgetting extra operators, floor space and tooling. Finally, remember a new machine does not fix poor planning or changeover practice. It often inherits the same losses as the old one.
- Haircut the OEE target before comparing
- Include installation, tooling and operators for the new machine
- Fix the loss causes first or the new machine will repeat them
Frequently Asked Questions
Is improving OEE always cheaper than buying a machine?
Often, but not always. Gains are limited by how much avoidable loss exists, and by whether the line is the constraint. If OEE is already high, buying capacity may be the only route.
How should I treat risk?
Apply a haircut to the target OEE, for example achieving only two thirds of the planned gain, and see whether improvement still wins. The chart shows how the comparison changes with the target.
Does this include depreciation and tax?
No. It spreads cost evenly over the horizon. For a full decision, run a discounted cash flow with tax, depreciation and residual value using the numbers from this screen.
Can I do both?
Yes. A common plan is to improve OEE first, to capture low-cost units and learn the loss structure, then buy capacity only for demand that remains. It also gives the new machine a better chance of performing.
If you need a defensible capacity case, we can help pull planned hours, actual run time and downtime from your ERP so the inputs are not guesses.
Related Tools
OEE Improvement Payback Calculator
Convert a planned OEE improvement into extra units, margin, payback and ROI so the project can be funded on numbers.
MES & Shop FloorBottleneck Improvement Throughput Gain Calculator
Find the real system throughput and annual value from improving the constraint, including when the next resource takes over.
MES & Shop FloorSpeed Loss and Micro-Stoppage Calculator
Separate the performance loss in OEE into reduced speed and minor stops, and see the parts each one costs per shift.
Discrete ManufacturingManufacturing Downtime Cost Calculator
Combine lost contribution margin, idle labor, and absorbed overhead into a defensible monthly and annual downtime cost - with recovery effects modeled.
Industry TemplatesOEE Improvement A3 Charter Template
A fill-in A3 style project charter that captures baseline OEE, the biggest loss, countermeasures and follow-up on one document.
More Costing & Finance tools
See all- Manufacturing KPI Formula and Definitions Reference
- Manufacturing Cost Variance Types Reference
- Price, Volume and Cost Margin Variance Calculator
- Month End Reporting Readiness Checklist for Manufacturers
- OEE Improvement Value Calculator
- Six Sigma Project Savings Tracker Worksheet
- Should Cost Model Worksheet for Machined Parts
- Quote Assumptions and Exclusions Template
- Tooling and NRE Amortization Quote Worksheet